MUMBAI — The Reserve Bank of India’s (RBI) 2026 dividend policy is set to provide major lenders greater flexibility by linking payouts directly to Common Equity Tier-1 (CET1) capital buffers and adjusted profits. The new framework moves away from rigid caps, rewarding banks that maintain structural capital strength and clean balance sheets.

Key Policy Shifts:

• Bucket System: Dividends will now be determined by a ten-bucket structure based on CET1 ratios. Banks with surplus capital can now see payout ratios rise substantially.
• Profit Recalibration: Payouts are now tied to "adjusted profits" (reported profit minus 50% of net NPAs), ensuring that asset quality risks are factored into shareholder returns.
• Higher Caps: The previous 40% rigid dividend cap has been replaced. While payouts can now reach 100% of adjusted profits, an absolute ceiling of 75% of reported profits remains for conservative oversight.

Winners & Outlook:

• Large Lenders: Well-capitalized institutions like SBI and select mid-tier private banks are expected to move into higher payout buckets due to recent equity raises and declining non-performing loans (NPLs).
• Prudent Resilience: While limits have increased, analysts expect banks to remain cautious, balancing higher shareholder returns with the need to maintain robust capital buffers against global headwinds.

This shift marks a significant transition from the 2025 framework, prioritizing capital resilience and asset-quality discipline over simple regulatory compliance.